The universe of the game is one with a history very similar to ours, but following the end of the American Civil War it began to diverge. In 1969 with the passing of the Civil Rights act, the two universes began diverging at a much more rapid rate. The second civil war (or the Southern War of Independence, depending on who is being asked) broke out.
When the dust cleared, it seemed the US had split into four main factions. There were those states that remained as part of the US, though the constitution was drastically rewritten and it was no longer truly the same country. There were those states, looking out for their own interests or for other reasons who joined Canada as Canadian Provinces. There were the states that formed the Southern Confederacy, which was neither (It encompassed states as far northwest as Montana; and while the states were officially allied, the region was torn by strife and civil war). And there were states that were annexed by the opportunistic Soviet Union.

Disclaimer: We have nothing against any state in particular. This is just us being random. In fact, I handed over the only three states I've lived in to the Soviets, so apparently I'm Russian now. And Goo is Canadian.